Businesses Are Taking Action After Brexit Warnings Go Unheeded

Loading ....

Businesses have been sounding the alarm over Britain’s impending departure from the European Union ever since its approval in a 2016 referendum. But this week, with lawmakers unable to agree on any sort of orderly plan as the March deadline for a deal nears, their warnings rang louder — and some decided to act.

Airbus and Bentley called the prospect of Brexit without an agreement a “killer” and a “disgrace.” Sony, concerned about Brexit-generated disruptions, said it would move its European headquarters from Surrey to the Netherlands. Other companies are furiously stockpiling supplies, while civil servants are scrambling to prepare for emergency arrangements.

While politicians may yet pull together a deal before March 29, analysts say businesses have run out of time. The precarious state of affairs is already damaging the economy.

“Until the middle of last year, it was a slow burn — we lost about 2 to 3 percent of output,” said Amit Kara, head of British macroeconomic research at the National Institute of Economic and Social Research. “My feeling is it has gathered a little bit of pace since then.”

Manufacturers are increasingly reluctant to invest in uncertain political and economic conditions, according to a survey published this week by the Confederation of British Industry, and some business leaders are going public with their frustration.

“They’re breaking cover because they’re feeling close to the edge at this point,” said Jonathan Portes, a professor of economics and public policy at King’s College London.

Airbus, which employs about 14,000 people in Britain making wings for its aircraft, said that if the country left the European Union with no deal, supply-chain disruptions would force it to look to move its factories elsewhere.

“Make no mistake: There are plenty of countries out there who would love to build the wings for Airbus aircraft,” Tom Enders, the chief executive, said in a video posted on YouTube this week.

The British transportation industry imports a large portion of its parts from the European Union and sells a large portion of its products there. Airbus warned last summer that a Brexit without a replacement deal could cost it more than $1 billion a week.

In his video, Mr. Enders called it a “disgrace” that businesses still did not have enough information to make plans.

“Please don’t listen to the Brexiteers’ madness which asserts that, because we have huge plants here, we will not move and we will always be here,” he said, referring to supporters of Brexit. “They are wrong.”

Since Parliament defeated Prime Minister Theresa May’s Brexit plan last week, lawmakers have been battling over a second, similar plan she presented. Mrs. May has refused to rule out leaving the European Union without an agreement, gambling that lawmakers will back her rather than allow that possibility.

“The U.K. is not and cannot be ready for a ‘no deal’ Brexit,” Carolyn Fairbairn, the director general of the Confederation of British Industry, said Tuesday. “Only Parliament can avoid it, and now is the time to do so.”

The chief executive of the Civil Service, John Manzoni, conceded that his organization would not be fully prepared. “Will things be a bit bumpy? Of course, they will,” Mr. Manzoni said Tuesday at the Institute for Government, a British policy group.

The chief executive of Bentley, Adrian Hallmark, told Reuters on Tuesday that his luxury car company had been headed for a turnaround after a year of losses, but that political events could scupper its plans.

“It’s Brexit that’s the killer,” he said.

Another carmaker, Jaguar Land Rover, confirmed on Thursday that it would pause production for a week in April to deal with potential disruptions.

Companies are planning stockpiles of parts and supplies — if they can find room. The United Kingdom Warehousing Association surveyed its members last month and said three-quarters were already full and unable to take on more business.

Many businesses also do not have the money to stockpile and prepare, said Mr. Kara of the National Institute of Economic and Social Research. “If we did have a hard Brexit, the shock would be quite significant,” he added.

UK in a Changing Europe, a research group, has estimated that leaving without a deal could reduce Britain’s gross domestic product per capita by as much as 8.7 percent over 10 years from what it would be if the nation remained in the bloc.

“What you see here is a bit of frustration that the U.K. government could have handled it so badly and ignored the concerns of business,” said Mr. Portes of King’s College London, who is also a senior fellow at UK in a Changing Europe.

Even if an agreement is reached in time, the turmoil of the debate will have a lasting impact, he said.

Airbus has made it clear that “when it comes to the next big investment decision, the U.K. is not going to be on the list,” Mr. Portes said. “In the medium to long term, it’s clear that it’ll have a large negative effect on any future negative investment.”

Foreign direct investment in Britain is already 19 percent lower than it would have been had the referendum not happened, according to researchers at the University of Sussex.

Dyson, the home appliances company, denied on Tuesday that its decision to relocate move its headquarters from England to Singapore was related to Brexit, but few saw it as a vote of confidence for the business environment in Britain.

And Brexit might not be the only challenge for the British economy, Mr. Kara said. The global economy is slowing, and Britain is likely to be vulnerable should there be another shock to it, he said.

“It’s like a country that has an armed force that is able to battle on one front, but if another front opens up, we are certainly more vulnerable than many other countries,” he said.

Source link



Please enter your comment!
Please enter your name here